Retail Price Elasticity

by Esthr

Retail Price Elasticity

An important concern of retailers is to know the effect of sales of marketing activities such as price discounts or special promotions. Since the advent of optical scanner data, retailers have utilized estimates of the effects of marketing mix variations to better manage inventory, shelf-space allocation, and promotional activities (Food Marketing Institute 1985; Petrison 1987). The effects of marketing activities on retail sales are frequently assessed by estimating sales-response functions (e.g., Moriarity 1985). Price elasticity explains the amount change in goods shopped by a retailer because of change in unit price. But a crucial decision would be for a retailer is to know about his goods how elastic they are really in quantitative terms because which helps him to change prices accordingly to increase profits.

The following section gives a fair idea for a retailer about how elastic are his products.